March Madness in Wall Street: (What) Does the Market Learn from Stress Tests?
Electronic Access:
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Summary:
Annual stress tests have become a regular part of the supervisors’ toolkit following the global financial crisis. We investigate their capital market implications in the United States by looking at price and trade reactions, information asymmetry and uncertainty indicators, and bank activities. The evidence we present supports the notion that there is important new information in stress tests, especially at times of financial distress. Moreover, public disclosure seems to help reduce informational asymmetries. Importantly, public disclosure of stress test results (and methodology) does not seem to have reduced private incentives to generate information or to have led to distorted incentives.
Series:
Working Paper No. 2015/271
Subject:
Banking Financial institutions Financial sector policy and analysis Stocks Stress testing
English
Publication Date:
December 23, 2015
ISBN/ISSN:
9781513537405/1018-5941
Stock No:
WPIEA2015271
Pages:
34
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